A note on a generalized Black-Scholes formula

Bakhodir Ergashev

Finance from EconWPA

Abstract: A generalized Black-Scholes formula is presented for the case when the volatility part of the percentage changes in a stock price obeys a mean reverting Ornstein-Uhlenbeck process. When the parameter of the Ornstein-Uhlenbeck process converges to zero the generalized formula converges to the Black-Scholes formula.

Keywords: Black_Scholes formula; Option pricing; Ornstein-Uhlenbeck processes (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin
Date: 2002-03-20
Note: Type of Document - none; prepared on IBM PC - PC-TEX; to print on HP/PostScript/Franciscan monk; pages: 5 ; figures: none. We never published this piece and now we would like to reduce our mailing and xerox cost by posting it.

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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0203006

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